Thanks to the digital euro, Europeans will be able to get by without banks (or almost all of them) and all the intermediaries we need today for our economic transactions. This will reduce costs for citizens by making payments instant and free of charge, including international payments. The benefits will be for everyone, but especially for businesses and wholesale trade. Maria Demertzis, senior fellow at the Bruegel think tank in Brussels, believes this; Accordingly, if Europe knows how to act well, it can also become a world leader in this new style of finance, which will have a “potentially revolutionary” structure. coup.
The European Central Bank has taken a step towards the launch of a digital version of the euro, a kind of community Bitcoin, a cryptocurrency that will be issued directly by the Frankfurt institute and join (and in the future possibly replace) the traditional currency. banknote. A two-year “preparation phase” will begin on November 1 to finalize the rules and select private sector partners for this project. This “test and experiment” phase will serve to understand what the benefits or risks are associated with a common digital currency. The ECB promises that the new virtual currency will be widely accepted around the world, be easy to use, free for basic uses and can be used for every digital payment in the Eurozone.
So what will it actually mean to have a digital currency rather than a physical one? “Having 10 euros in your pocket means that you have a contract with the ECB, which means that when you present that contract, you can receive the equivalent in goods or services from someone else. It is the ECB that gives the guarantee of the value of that piece of paper to us. The same goes for what we have in the bank, It does not apply to money that has no physical equivalent, called ‘legal currency’. That money has a guarantee of up to 100 thousand euros in Europe. This means that if we have an account of 150 thousand euros in a financial institution and the institution fails, the citizen will lose 50 thousand euros. is coming,” explains Demertzis in an interview with Today.it. On the other hand, the economist says that according to Frankfurt’s intention, the digital euro will be “fully guaranteed by the European Central Bank and this will make deposits much safer.”
“Currently, many countries in the world have developed a digital currency issued by their central banks, but these are developing countries and the reason they are doing this innovation is to increase financial inclusion in the banking system and therefore cannot make digital payments. But Europe, where 99% of citizens have a bank account.” “But the ECB is moving early because it wants to create evidence of a system bomb for the day of payments. There will be no more cash, because the economy seems to be heading in that direction, it wants to create an alternative when the system is fully digital.” Frankfurt’s aim is to focus on Europe’s “strategic autonomy”, that is, to eliminate all the intermediaries that we need (and have to pay) today to become self-sufficient. “70% of all payments in Europe are brokered by non-European companies”, such as Visa or Mastercard, for which we also have to pay a small fee.
The digital transactions we currently make via ATM or mobile phone always have to be made through a financial institution or POS, a physical terminal that involves the payment of a commission by the merchant. We cannot transfer euros directly to someone else’s account by giving money from our pocket to their pocket, and we have to ask our bank to transfer the money on our behalf. Digital money, on the other hand, does not require banks to act as intermediaries. This money can be stored in a cloud via a mobile device or computer and instantly transferred to another person’s or company’s cloud, as if you had sent an email (or, more precisely, downloaded a file in peer-to-peer mode). ). “The cloud will be managed directly by the ECB, which will guarantee its security in the same way that digital banks guarantee the security of their accounts today, or even better. That is why we should not be afraid of digital currencies,” claims Demertzis.
And bank transfers will be instant and free, even international transfers. “Today, if there are no bilateral agreements between two countries, it can take days for an international transfer to be implemented, and banks may also give some credit for the service. With the digital euro, this situation will disappear.” In fact, Europe already has a system for instant international transfers called Tips (Target Instant Payment Settlement). “But Brussels has not made this mandatory and therefore many banks do not benefit from it,” the expert complains, complaining that this increases costs for citizens.
According to him, the savings and advantages for citizens are certainly obvious, but the most important ones will be for businesses. “You can really get huge benefits in wholesale trade. Money transfers will increase efficiency in terms of cost and time, especially internationally. Today, to buy in countries outside Europe, for example, you need to convert the payment into dollars, for example dollars, because it is a safe currency and other “We do not have the infrastructure of other central banks that issue currencies and so we have to use US central banks as intermediaries, which would not be necessary if there were digital currencies. For businesses, the payment of money will be instant and free or however very cheap,” he assures Demertzis.
Considering that the United States has not even begun to plan to create a digital dollar, and only China has done so among global giants, Europe could become a world leader in the sector. The ECB is “well positioned to contribute to the large-scale design of this new form of payment and can contribute to global dialogue as well as set standards and protect its citizens as much as possible.”
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Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
